June 17, 2008

Obama's Brief History Of The Post-war Economy

WSJ: You talked about the last eight years and the question of redistribution goes way back …

Sen. Obama: Oh, there's no doubt about it.

That's why I say that the combination of globalization and technology and automation all weaken the position of workers. I would add an anti-union climate to that list. But all weakens the position of workers, particularly blue-collar workers, in the economy, and some of it is just historical. You know after World War II, we were in this unique position where Europe was decimated, Japan was decimated. China was off the grid because of Mao. And so we didn't have a lot of competition out there, and now other countries are rising and automation has supplanted a lot of work that used to be done by middle-class workers.

We have drastically increased productivity since 1995, and there was the theory that if you increase productivity enough some of these problems of living standards would solve themselves. But what we've seen is rising productivity, rising corporate profits but flat-lining or even declining wages and incomes for the average family.

What that says is that it's going to be important for us to pay attention to not only growing the pie, which is always critical, but also some attention to how it is sliced. I do not believe that those two things -- fair distribution and robust economic growth -- are mutually exclusive.

You get to a point, I think, if you have a participatory income tax, for example, where you might be discouraging work because marginal rates are so high. You might undoubtedly get to a point where the capital gain and dividend taxes are so high that they distort investment decisions and you're weaker economically. But you know if you've got a sensible policy that says, we're going to capture some of the nation's economic growth … and reinvest it in things we know have to be done, like science and technology research or fixing our energy policy, and then that is actually going to be a spur to productivity and not an inhibitor.

Also, Obama's response to this question about the roles Bob Rubin and Bob Reich might play in his administration really reflects the sensibility I described in this piece--that is, of intense pragmatism and empiricism and a general aversion to ideology:

WSJ: Given the last time Bob Rubin played a role in deficit reduction, what role do you expect him to play?

Sen. Obama: I'm sure Bob will be one of numerous advisors. I speak to folks on all sides of that Democratic divide. I've got Bob Rubin on one hand, Bob Reich on another, folks in between.

WSJ: Are you going to give Reich another shot?

Sen. Obama: … I tend to be eclectic. I do think we're in a different time in 2008 than we were in 1992. The thing I think people should feel confident in is that I'm going to make these judgments not based on some fierce ideological pre-disposition but based on what makes sense. I'm a big believer in evidence. I'm a big believer in fact. You know, if somebody shows me we can do something better through a market mechanism, I'm happy to do it. I have no vested interest in expanding government or setting up a program just for the sake of setting one up. It's too much work.

On the health-care front, for example, if I actually believed that just providing a tax cut to everybody would solve the problem of lack of health insurance and cure health-care inflation, I'd say great, that's a nice way to do it. It prevents a lot of headaches. But I've seen no evidence that the kinds of policies John McCain puts forward would actually work.

If I saw strong evidence that an additional $300 billion in tax cuts that John has proposed -- without a clear way of paying for it -- would actually boost economic growth and productivity, I'd be happy to take a look at that evidence. But I haven't seen that. It's all conjecture.